The economic backdrop to euro-zone commercial property markets continues to deteriorate. Our forecasts, that all member states will experience some falls in economic output next year, appear to be on track. Recession will put downward pressure on rental values and upward pressure on commercial property yields. Property markets in core euro-zone economies should outperform those in the periphery, but they will not be immune to the weaker economic outlook. In other words, renewed falls in capital values, already evident in Italy and Spain, are likely to spread to core markets next year.
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